On December 31, 2018, Bedford Corp. sold a machine to Sheila Company and simultaneously leased it back for one year. Pertinent information at this date follows: In Bedford's December 31, 2018 income statement, the gain recognized from the sale of this machine should be:

Question

On December 31, 2018, Bedford Corp. sold a machine to Sheila Company and simultaneously leased it back for one year. Pertinent information at this date follows:  In Bedford's December 31, 2018 income statement, the gain recognized from the sale of this machine should be:

Quizplus · Accepted Answer

Since the leaseback qualifies as an operating lease, the sale and the lease are viewed separately and the entire $50,000 gain ($940,000 - 890,000) is recognized on the sale.